Social Security has been a major topic in the news, especially as the new administration considers potential changes to benefits. Naturally, this raises a lot of questions: Is Social Security secure? Will my benefits change? Should I be concerned?
To help provide some clarity, we’ve gathered some of the most common questions we’ve heard from clients recently. But first, here’s some important background.
Important Background About Social Security
Social Security provides crucial benefits to retirees, disabled individuals, and survivors, but its financial future is uncertain. For years, payroll taxes from a larger workforce, including baby boomers, built a surplus. Now, with more retirees and fewer workers contributing, that surplus is being depleted and is projected to run out by 2033 unless Congress intervenes.
Learn more about the history and how to incorporate Social Security into your financial plan.
FAQ About Social Security
Will Social Security disappear?
If no action is taken, Social Security will continue to pay benefits, but at a reduced level. By 2033, benefits could be cut by approximately 21% to align with incoming payroll tax revenue. While that would be a significant adjustment, here’s what to keep in mind:
- Social Security is not going away.
- Congress has options to address the shortfall.
- Changes are more likely to impact younger workers than current retirees.
Staying informed and prepared will help you navigate any potential changes with confidence.
I heard the President wants to end taxation of Social Security benefits. Wouldn’t that make the problem worse?
Currently, some retirees pay taxes on their Social Security benefits, which helps fund the program. However, this accounts for approximately 4% of Social Security’s total revenue. While eliminating this tax would reduce funding slightly, it wouldn’t have a major impact on the program’s overall shortfall. If Congress moves forward with this change, they would likely need to find another way to replace the lost revenue.
I heard there’s a proposal to eliminate Social Security benefits for ex-spouses. Is that true?
There have been discussions about modifying Social Security benefits for divorced spouses, but no formal proposal exists to eliminate them entirely. Some ideas suggest adjusting eligibility based on the length of the marriage, but from what we can tell, these are think tank proposals, not official policies of the current administration or Congress. At this time, we are not aware of any active legislative effort to remove benefits for ex-spouses.
What is the current administration’s view on cutting benefits?
The Trump administration, both in office and in campaign statements, has repeatedly stated that it does not support reducing benefits, despite pressure from some conservative groups and fiscal hardliners.
How could Social Security be fixed?
There are several policy options to address Social Security’s funding gap, many of which wouldn’t impact current or near retirees. Some of the most commonly discussed solutions include:
- Increase the payroll tax slightly. Raising the payroll tax from 2% to 7% for workers and employers would help close a significant portion of the funding gap.
- Lift the taxable wage cap. For 2025, payroll taxes only apply to earnings up to $176,100. Raising that cap to $250,000 or higher would increase revenue and help sustain the program.
- Gradually raise the Full Retirement Age (FRA) to 69: Since people are living longer, a gradual increase in the FRA from 67 to 69 could help balance the system over time.
These moderate adjustments would go a long way in maintaining Social Security’s solvency without requiring drastic cuts to benefits.
Have Social Security benefits ever been cut before?
Yes. While Social Security has never disappeared, Congress has made changes that effectively reduced benefits:
- Taxation of Social Security Benefits (1983) – Before 1983, Social Security benefits were completely tax-free. Congress introduced taxes on benefits for some retirees to help fund the program, reducing net benefits for those affected.
- Increase in the Full Retirement Age (1983) – The FRA was gradually raised from 65 to 67, effectively reducing lifetime benefits for future retirees.
- Elimination of “File and Suspend” (2015) – Congress phased out a claiming strategy that allowed married couples to maximize benefits. This change reduced benefits for some couples, but it was implemented gradually, so most people barely noticed.
Is this factored into my financial plan?
- For current and near retirees: We do not assume that Social Security will be drastically cut for those already in or near retirement. Historically, changes have only impacted people 10 to 20 years away from retirement, and we expect that to continue. In other words, we have not factored in a 21% cut starting in 2033.
However, we have generally factored in a slower growth rate for Social Security benefits compared to overall projected inflation. Over a 30-year retirement, this effectively results in a built-in 7% reduction in benefits in our planning models.
- For younger workers: We generally take a conservative approach when estimating future Social Security benefits. In some cases, we even run projections assuming reduced or no benefits as an added precaution.
What should I do?
Regardless of where you are in your retirement journey, it’s important to plan for potential changes to Social Security.
- Assess Your Cash Needs – Understand your fixed vs. discretionary expenses to build flexibility into your retirement plan.
- Evaluate Your Income Sources – Identify all available resources, including pensions, investments, part-time work, and Social Security.
- Consider Claiming Strategies – Know how your benefit amount changes based on when you start claiming.
- Stay Informed – Monitor potential Social Security changes and adjust your financial plan as needed.
- Stress-Test Your Plan – Work with your advisor to model different scenarios and ensure your plan remains secure.
Final Thoughts
While Social Security’s future may be uncertain, your financial well-being doesn’t have to be. With thoughtful planning and the right strategies in place, you can create a retirement plan that gives you confidence and peace of mind, no matter what changes may come. We’re here to help you navigate changes, make informed decisions, and adapt as needed so you can move forward with confidence.